Deficit politics

Monday 7 December 2009 16.09 EST
First published on Monday 7 December 2009 16.09 EST

Poll after poll says Americans care deeply about the budget deficit. Liberals don't like to believe this and tend to say that people think of the deficit as a "proxy" for other economic issues. In a nutshell, this is because we're Keynesians, and we're okay with deficit spending. So liberals tend to come up with rationales for surveys in which people say the deficit is a top concern.

I'm not so sure. I think we'd do better to take people at face value. Deficit reduction is one of those mantras that is now deeply inculcated into the political culture. It became a huge issue here in the 1980s -- Ronald Reagan railed against deficits, even as his policies made them shoot through the roof, although of course we're supposed to forget that now -- and has been ever since because, unfortunately, it makes intuitive sense to people that if they have to balance their checkbooks, the government ought to have to balance its. This is not true, but it's awfully hard to explain to people why it's not true.

Additionally, people don't trust the notion that spending now can reduce the deficit later. When Obama tried to say "healthcare reform is deficit reduction," it didn't fly because it doesn't sound right to people. And the CBO reports that the Senate bill will reduce the deficit over time, and no one believes it.

So, there's tremendous pressure on all administrations to gesture toward deficit reduction. The pressure is especially intense now that a) the deficit is running 13% of GDP and b) the bunch in power is assumed to be profligate big-spenders. Pressure on Obama to wrestle with deficit reduction will be particularly intense next year, after healthcare is finished one way or the other.

Surrounded as he is by deficit hawks in large part (Geithner, Summers), Obama might be expected to succumb to the naked politics. But lo and behold, at his jobs summit last week, he was asked by Bob Kuttner, my old American Prospect colleague, about where he ranks deficit reduction vs. spending as priorities. You should read Obama's extended remarks, because they're...subtle and clever. Nut graf:

The last thing we would want to do in the midst of what is a weak recovery is us to essentially take more money out of the system either by raising taxes or by drastically slashing spending. And frankly, because state and local governments generally don't have the capacity to engage in deficit spending, some of that obligation falls on the federal government.

In other words, he's not going to be bullied into symbolic deficit reduction just so David Broder will write nice things about him. It's an important quote that will be well worth remembering as time goes on.